Cryptocurrency trading firm Genesis Global Trading will pay the New York State Department of Financial Services $8 million and surrender its BitLicense to settle allegations it violated the agency’s compliance regulations.
Routine examinations and an investigation that followed found that GGT did not meet standards required in Bank Secrecy Act/Anti-Money Laundering compliance, transaction monitoring, suspicious activity report filings, Office of Foreign Assets Control screening and cybersecurity, according to an NYDFS announcement Friday.
“DFS’s virtual currency and cybersecurity regulations are often cited as the gold standard, providing clear and stringent requirements to protect consumers and safeguard institutions from bad actors,” said Superintendent Adrienne Harris. “Genesis Global Trading’s failure to maintain a functional compliance program demonstrated a disregard for the Department’s regulatory requirements and exposed the company and its customers to potential threats.”
Since it was founded in 2013, $116.5 billion in spot trading happened through Genesis, making it one of the largest crypto trading desks by volume.
GGT will surrender its BitLicense, which it’s had since 2018, as part of this settlement. But the firm has been in the process of winding down since September, a decision which was made “voluntarily and due to business reasons,” the firm said at the time.
GGT is a subsidiary of Digital Currency Group, and operates independent of sister company Genesis Global Capital, which was charged by the Securities and Exchange Commission for selling unregistered securities last January. GGT was not involved in the Gemini Earn program for which GGC was charged. A week before the SEC charges, GGC filed for bankruptcy. At the time, GGT was unaffected.
“Genesis had taken substantial measures to address these historical deficiencies and is pleased to resolve this matter,” a spokesperson told Banking Dive by email. “Genesis appreciates the DFS acknowledgment of management's investment and efforts during and after the examination period.”
Harris’s department has levied fines against crypto exchange Coinbase, stablecoin issuer Paxos, and once-crypto-friendly Metropolitan Commercial Bank in the past year and change. But unlike the SEC, which some companies and observers have accused of “regulating by enforcement,” the NYDFS has a digital asset-specific regulatory framework.
“We're the only prudential regulator with crypto-specific authority, and I take that very seriously,” Harris told Axios in December.
All told, NYDFS has levied more than $140 million against digital asset companies.
GGT’s penalty comes 10 days after an audit by New York State Comptroller Thomas DiNapoli found holes in the NYDFS’s BitLicense application evaluation process. DiNapoli’s audit also found that NYDFS would conduct its biennial evaluations, on average, every three years.
